“Billion-dollar gift for Springer boss: shares largely tax-free”? Can I do that too?

“Billion dollar gift for Döpfner – largely tax-free?” – this headline is not from me, but from the morning mail. Therefore immediately a new article on the topic tax optimization and the question: How does that work? Matthias Döpfner has actually turned the publishing house upside down as boss. While owner Friede Springer stands confidently behind his decisions. Print shares were sold and new online media such as Business Insider, Idealo, Immowelt and StepStone were acquired. Already in 2012 Döpfner has received a big share package for more than 70 million Euro, now a “billion-dollar gift” for the Axel Springer boss is going to go, according to Manager Magazin. The 57-year-old media manager is increasing his previous stake in Axel Springer SE from just under three percent to a total of around 22 percent. In really good tax coaching sessions from experts, one learns how tax optimization and structuring works, but a “gift worth billions […] largely tax-free”… Can I do that too?”

Share Gift and Company, PS: Tax optimization is legal

Tip! How does it work that you can get a share package almost tax-free? A little further down in the article I explain the methodology, or rather the law behind it.

First of all, a brief overview: Mathias Döpfner, head of the Springer publishing house, is given a large block of shares as a gift. The parcel of shares given to him, from about 15 percent of Axel Springer SE, has an estimated value of a good one billion euros. According to current news, he will hardly have to pay taxes on it. A “billion-euro gift for Döpfner”, according to the Morgenpost. The Tagesschau (both German) summarizes it best:

“Springer boss Döpfner rises to become major shareholder of the Berlin media house. Publisher’s widow Friede Springer sells her confidant around 4.1 percent of the share capital and gives him another 15 percent or so”

Before we look at how such a gift is structured so that no or hardly any tax is due, here is a rough look at the publishing house Axel Springer SE and its development under Döpfner.

Here’s a quick reading tip: Today it flickered through the news tickers of the world. According to the New York Times, US President Trump pays only 750 Euro income tax. It gets even better, according to the New York Times Trump paid no income tax in 10 of 15 years from 2000 onwards. How does he do that?

Axel Springer SE: Development under Döpfner

As already described in the introduction, he needed changes and Friede Springer clearly sees him as her successor.

The rapidly growing online business boosted earnings before interest, taxes, depreciation and amortization to 309 million euros in the first six months. This is the highest operating profit in the history of the Group. The digital business accounts for around a third of the profit – and the trend is rising, so that Handelsblatt.

How does the turnover develop over time? The Federal Statistical Office reports: “In 2019, the turnover of Axel Springer SE was more than 3.1 billion euros […]. There has been a tendency for revenues to increase since 2007, but the highest revenues of almost 3.3 billion euros were generated in 2015.

AxelSpringer SE at a glance:

  • CEO is Mathias Döpfner since Jan. 2002
  • The major owner is Kohlberg Kravis Roberts & Co. (43.54%)
  • Revenues in 2019 amounted to EUR 3.1 billion
  • 16,120 employees in 2019
  • Headquarters is Berlin
  • The founder of the publishing house was Axel Springer

Subsidiary of Axel Springer

While print shares were disposed of, Döpfer and Springer invested primarily in digital business models. The Axel Springer SE includes among others:

  • AWin (Affiliate Platform)
  • ideal
  • Immowelt Holding AG
  • StepStone

Of course, the publishing house still includes print products, as well as BILD and TV stations like WELT.

  • Bild group (Bild , Bild am Sonntag, bild.de)
  • Bild magazines (like Computer Bild, Sport Bild, Auto Bild, Audio Video Foto Bild)
  • Welt Group (Welt, Welt Kompakt, Welt am Sonntag, welt.de)
  • Welt-TV (World, N24 Documentary)

Axel Springer SE: Share Price (Realtime)

Finally, a look at today’s share price with a review of the year:

  • WKN: 550135
  • ISIN: DE0005501357
  • symbol: SPR

73 million: First transfer already 2012

The Süddeutsche will report as early as 2012 on the first transfer of shares from Friede Springer to CEO Mathias Döpfner worth around 73 million euros.

“The generosity has a “purely private background”

The Pressehaus said:

In order to fend off overly curious journalists, Springer agreed on this language regulation. It also has an impact on how much tax Döpfner has to pay on the gift, so on in Southern Germany.

“If the tax office were to come to the conclusion that the reason for the share transfer was Döpfner’s employment relationship, he would have to pay millions in wage tax on the gift. With the solidarity surcharge, around EUR 36 million in taxes would be due. If, on the other hand, Döpfner succeeds in convincing the office that Friede Springer gave him the shares out of pure affection, he could save a lot of money. Under certain circumstances he would then even have to pay only around 2.5 million Euro to the tax office.”

Why Largely Tax-Free? Explanation

First of all there is a tax-free amount for all donations. The regulations are laid down in the Act on Inheritance and Gift Tax.

Free Amount in Case of Gift (Capital): Outside the Family

In general, the following rates from the Inheritance Tax and Gift Tax Act (ErbStG) § 16 allowances for inheritance and gift apply.

(1) In cases of unlimited tax liability (§ 2 paragraph 1 number 1) the acquisition remains tax-free:

  1. of the spouse and the life partner in the amount of 500 000 euros;
  2. of children within the meaning of tax class I No. 2 and children of deceased children within the meaning of tax class I No. 2 in the amount of 400 000 Euro;
  3. of the children of the children within the meaning of tax class I No. 2 in the amount of 200 000 Euro;
  4. other persons in tax class I in the amount of 100 000 Euro;
  5. of persons in tax class II in the amount of 20 000 euros;
  6. (omitted)
  7. other persons in tax class III in the amount of 20 000 Euro.

The Morgenpost reports accordingly:

Actually, the publisher’s widow’s gift to her top manager would not be such a generous one. For gifts outside the family, 50 percent gift tax is due above the allowance of 20,000 euros. In this case, this means almost half a billion euros. But there are exceptions, for example for business assets.”

Free amount for donation: Within the family (excursus)

Within the family you have a higher allowance:

  • Spouses and registered partners: 500.000 Euro
  • Donation to children: 400.000 Euro
  • Gift to grandchildren: 200.000 Euro

If there is little or no degree of kinship, the tax-free amount is, as described, only 20,000 euros.

Share Package Almost Tax-Free: Method Explained

Why is a large part of the share package now largely tax-free?

The package has a volume of 15%. During the transfer, a law was exploited to prevent the possible insolvency of companies. Due to the high volume, Axel Springer SE could get into financial difficulties. As a reminder, the gift tax outside the immediate family is 50%, the tax-free amount is only 20,000 euros.

Gift tax: 50%

Exempt amount: 20.000 Euro

Tax-free: Possible financial threat to Axel Springer SE

The possible financial threat to Axel Springer SE is therefore the legal sticking point, which is why a large part of the tax (according to current news [03.10.2020]) is waived.

Gift, Capital Gains, Real Estate – Almost Tax-Free ?

We have answered the question from the headline: “Largely tax-free? Now we come to the second part: “Can I do that too?” Short answer: Yes. The way: Coaching from a professional, learn, understand, actively apply. The important thing is that taxes are a matter for experts.

You want to Save Taxes like a Pro?

You want to save taxes like the professionals? I don’t write any names because I don’t want to make a big advertisement, but there are great tax coaching services just a google search away.

I have been following several self-made real estate investors for a long time. Anyone who has made it from zero to a millionaire with legal methods can only be a good role model for me.

The best thing about tax optimization, it is absolutely legal!

US President Pays only 750 Dollars Income Tax

As I have reported here in the article about the American President’s meager 750$ reported taxes, tax optimization is common practice. Everyone who submits a tax return and for example deducts travel expenses is actively minimizing taxes.

Financial optimization is especially about understanding and knowledge: Knowing that your tax advisor does not have and will never have. If he or she did, he or she would be an investor himself.

In other words: If you know the legal methods and ways of tax optimization, you can instruct your tax consultant to do the right things. The tax consultant should then take care of the operational work. Everything strategic, methodical, you should master.

Understand and Convert Taxes & Build up Assets

Tax optimization, tax-free, the most popular buzzwords when it comes to wealth accumulation. But how do you actually convert private wealth into taxes? My tip, as before, is to learn from professionals who have all been through it.

Always remember: taxes are a matter for experts.